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Politics of privatisation

The privatisation of PIA remains a thorny issue between the government and the employees as experts remain divided on the best way to deal with this loss-making public sector entity

Politics of privatisation
Employees of PIA shout slogans as police use a water cannon on them during a protest near Karachi International Airport. Photo by Rizwan Tabassum / AFP.

Pakistani airports have turned into a battlefield for the past few days. The reason is yet another strong move to privatise the national flag carrier, Pakistan International Airlines (PIA), a huge loss-making public sector entity of the country.

The Joint Action Committee of PIA has come down hard on the government’s decision of privatisation — by coming out on the roads and suspending flight operations and taking out protest rallies. On its part, the government has announced to deal the protesting PIA workers with an iron hand, urging the employees not to go on strike through an unprecedented Essential Services Act. This allows the government to disperse the protestors seeking the help of law enforcement agencies.

The worst manifestation of this strategy was witnessed last week, when three PIA employees got killed and many were injured after the law enforcement agencies forcibly tried to disperse the protest rally outside the Karachi airport.

The privatisation has come about in the wake of conditionalities of International Monetary Fund (IMF) — to address the fiscal concerns with regard to the loss-making entities. Under the $6.7 billion IMF bailout programme, Pakistan had agreed to sell 26 per cent shares of PIA to a strategic investor. Under the IMF conditions, Pakistan’s Privatisation Commission in 2014 gave a go-ahead for the privatisation of the three state-owned entities, including the PIA, the Pakistan Steel Mill and electricity distributing companies (DISCOs).

Experts believe the PIA has reached its current state because of government negligence, lack of professional management, and not enough investment. The airline has been reducing its business over the years but expanding its cost and operational force during successive political governments. Now, the sitting PML-N government is going tough on implementing this agenda for reducing its financial burden. It alleges the protests are being instigated at the behest of opposition parties which are backing the workers against this policy.

At the same time, a photograph has gone viral on the social media showing the sitting finance minister and interior minister of the PML-N agitating with the PIA employees in the last Pakistan People’s Party government opposing the announcement of privatisation of PIA.

Experts think the poor performance of PIA is a monumental evidence of the poor performance of the government because it’s the government that has been interfering in the PIA affairs.

Economist Pervez Tahir says, “Pakistan should not run PIA like a government department but a purely commercial entity. If the government wanted reforms it should have spent money on PIA instead of spending billions of dollars on new projects like Metro Bus and Orange Line mass transit.”

Economist Pervez Tahir says, “Pakistan should not run PIA like a government department but a purely commercial entity. If the government wanted reforms it should have spent money on PIA instead of spending billions of dollars on new projects like Metro Bus and Orange Line mass transit.”

Tahir thinks the government is feeling very powerful, especially after the recent retirement announcement of the army chief. “But the government should realise that these are public entities. It should think whether people are important or these entities. If we start privatising the economy this way, where we will adjust the government employees?”

With the current situation of unemployment, it may not be such a good idea to further lay off people, he says. “These things can be done when the economy is good. There is a ‘script’ that public entities should be privatised. “Why don’t we bring reforms, make such entities independent, sell their expanded properties and put less government burden on such entities,” he says.

Tahir asks why does the prime minister and official fleets use these planes free of cost. Why does PIA pay Rs20,000 bill of taxi just to drop the passport of the finance minister that he forgot at the airport. He suggests selling the PIA hotels and such unnecessary liabilities “when you have this less number of planes”.

He thinks the objective of privatisation is not clear. “If an organisation has a big number of employees, it does not mean it should be abolished. Then why do we need a staff of hundreds and a huge secretariat for the prime minister.” What needs to be done is “to improve PIA’s management, make it independent, reduce official financial burden, and sell its expanded assets and run it in a thoroughly professional way through a professional board rather than the prime minister, just like it is done in other countries”.

PIA is a government entity with a fleet of 34 planes and more than 16,000 regular and around 3,000 contractual employees. It operates 24 domestic destinations and 34 international destinations. PIA is running losses to the tune of approximately Rs3 billion per month with Rs1 billion markup included in the Rs3 billion amount.

Dr Salman Shah, former finance minister of Pakistan, believes there is no other solution than the privatisation of such a huge loss-making entity for Pakistan. “Either you have to privatise the airline or face its ultimate closure due to huge losses and expected bankruptcy in future,” he says. His view is that the PIA cannot survive without money and the government of Pakistan cannot afford to pump in billions of dollars to run it. “Even its restructuring needs at least three to four billion dollars.”

If we compare PIA with the Turkish Airlines, it has almost the same number of employees, it has a huge fleet compared to Pakistan and the company is earning profit too. Pakistan Airlines has 35 planes with this number of employees while Turkish Airlines has a fleet of around 250 planes.

“Privatisation of such entities is an academic exercise and Pakistan also has an agreement with the IMF to control budget deficit,” says Shah, adding that Pakistani business groups should be engaged and a consortium made to buy PIA shares. In his view privatisation is also the best option for workers. “It is unfortunate that PIA has become the worst airline of the region. Unless we put money into it, we cannot go ahead and the reality is we don’t have money.”

Shujaat Azeem, former advisor for aviation to prime minister, also left his office in the recent past opposing the privatisation of PIA. He strongly advocated a restructuring of the organisation.

In the current atmosphere of political opposition and increasing protests, IMF Resident Chief Tokhir Mirzoev has also indicated that the PIA privatisation requires political dialogue and parliamentary consensus after the preparatory work is done by the government. It is not the IMF but the parliament that should take the decision regarding loss making entities and whether it wanted to go ahead with the privatisation plan of PIA, Pakistan Steel Mills and power distribution companies, he said in a recent interview.

The government claims it would continue its efforts to convert the state-owned entity from a loss making unit into a profitable organisation. “The priority of the government is to transform PIA and other such loss-making entities and create competitive job environment through the sale of shares to strategic partners which would enhance the capacity of employees, besides improving the performance of the organisation,” says Mohammad Zubair, State Minister for Privatisation while talking to TNS. He claims the process of privatisation would be transparent, adding that the government is ready to talk to PIA workers and discuss the plan.

Waqar Gillani

waqar gillani
The author is a staff reporter. He can be reached at [email protected]

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